While an advisor’s designations indicate his or her qualifications, it can be said that a licence tells more about the business he or she actually conducts.

Among advisors surveyed in all categories this year for Investment Executive’s Advisors’ Report Card, a mutual fund licence is the most commonly held licence (78%), followed by insurance (66%) and securities (46%) licences.

Of course, the licence held by an advisor depends largely — but not entirely — upon his or her distribution channel. For example, almost all account managers and planners hold a mutual fund licence; among those who work at investment dealers, a smaller percentage — but still the majority — hold a mutual fund licence.

Similarly, almost all advisors who work at brokerage firms hold a securities licence, while very few insurance advisors are licensed to sell securities. And, of course, the reverse is also true.

There has been some movement, however, among mutual fund-licensed advisors working for member firms of the Mutual Fund Dealers Association and those licensed to sell securities on the Investment Dealers Association of Canada platform. The trend is toward securities licences and away from mutual fund licences.

IE Report Card surveys over recent years show a slight annual increase in the percentage of advisors who hold a securities licence. Forty-six per cent of all advisors now are licensed to sell securities, up from 44% in 2005 and 43% in 2004.

The actual number of licences issued by the IDA shows even more dramatic growth. The IDA reports a steady increase of individuals licensed to trade securities; in 2003, there were 23,054 registrants; in 2004, there were 24,150; and by end of 2005, there were 26,083. Today, there are 29,217 advisors licensed to sell securities in Canada — an increase of 26.7% since 2003.

The sharpest drop has occurred in the percentage of mutual fund licences held by advisors in all channels. Overall, 78% of advisors hold a mutual fund licence, down from 83% in 2005 and 92% in 2004. Brokers reported the most significant decrease in mutual fund licences, to 67% this year, down from 80% in 2005 and 83% in 2004. Still, mutual fund licences remain the most widely held licence.

Ian Russell, president and CEO of the Investment Industry As-so-ciation of Canada, says the migration to securities licences reflects two things: “One, you’re seeing new entrants come into the business who will license at the investment dealer level. [Two], you’re also seeing convergence taking place as mutual fund registrants upgrade to investment dealer registration.”

Client demand is also driving the trend, Russell says. As investors become more sophisticated, they are looking for a broader array of products — such as structured products, individual stocks and fixed-income securities. “The mutual fund-licensed advisor can’t execute those transactions themselves,” he says.

In addition, many employers are offering stock option plans for their employees, says Frank Laferriere, chief operating officer at Burlington, Ont.-based Berkshire Investment Group Inc. If advisors hold only mutual fund licences, they can’t help clients with those investments.

Berkshire is one of a number of planning firms that operate on both the MFDA and the IDA platforms, giving advisors a choice. The company has created a transition process to help advisors transfer their business from one platform to the other.

Laferriere says brokers recognize the value of the full financial planning traditionally embraced by MFDA advisors. “The planner had it right — a holistic view toward wealth creation, multiple licensing and insurance, in order to address the full gamut of wealth creation, wealth preservation and wealth distribution,” he says. Berkshire created the concept of the “IDA planner,” he adds, to replace the image of the “stock jockey” securities dealer.

For their part, planners see the value in being licensed to give their clients access to a full range of products. “The IDA world is looking at the very real strengths of the MFDA world, and the convergence would have the best of both worlds,” Laferriere says.

Russell also points to the perceived higher standard that comes with a securities licence. “The average investor would have more confidence in someone who has a higher standard of proficiency and is competent in more products.”

But the lines are less distinct when we consider multiple licensing. Seventy-two per cent of advisors in all channels say they hold multiple licences. Planners (91%) and brokers (82%) are the most likely to hold multiple licenses.

@page_break@Brokers are clearly jacks of all trades, in terms of rates of overlapping licences. The average broker holds 2.3 licences (out of a possible three); in addition to the 99% who hold securities licences, 67% hold mutual fund licences and 68% are licensed to sell insurance.

Planners are the next most licensed group, with an average of two licences per planner. They are heavily into insurance (93%) and mutual funds (89%), while only 20% of planners hold a securities licence. Overall, the average advisor in all channels holds 1.9 licences.

Although multiple licensing is prevalent, there are indications it has declined slightly in recent years. The 72% who hold multi-ple licences represents a drop from 74% in 2005 and 78% in 2004. Among brokers, multiple licensing has dropped to 82%, from 84% in 2005 and 93% in 2004. Among insurance advisors, multiple licensing has dropped to 71% from 81% in 2005 and 83% in 2004. And while the 91% multiple licence rate among planners is the same as in 2004, it dropped to 88% in 2005.

Only account managers experienced an increase in multiple licensing, rising to 28% in 2006 from 26% in 2005 and 15% in 2004. IE